Nigeria’s Central Bank (CBN) cut stop rates on medium and long-term Treasury bills at its latest primary market auction this week, marking a continued downward shift in domestic borrowing costs even as investor demand for government securities reached exceptional levels.
The CBN, acting in collaboration with the Debt Management Office (DMO), offered N1.05 trillion worth of Treasury bills at the midweek auction. Total subscriptions surged to N3.063 trillion, with investor appetite concentrated heavily at the long end of the curve. The 364-day bills alone attracted N2.893 trillion in bids, accounting for roughly 95 percent of all subscriptions.
Despite the scale of demand, the central bank exercised deliberate restraint. The CBN allotted only N691.87 billion to investors, representing approximately 23 percent of total bids, rejecting around 77 percent. The stop rate on 182-day bills was reduced to 16.62 percent from 16.65 percent, while the rate on 364-day instruments was cut to 16.63 percent from 16.72 percent recorded at the previous auction. The 91-day rate was held steady at 15.90 percent.
In the secondary market, trading remained largely quiet as investor attention focused on the primary auction. The average benchmark yield edged down by 3 basis points to 16.11 percent by the close of the session.
The rate reductions in the domestic market are being reinforced by improving conditions in Nigeria’s external debt market. Yields on Nigerian Eurobonds have also trended lower, supported by renewed investor confidence and the government’s move to secure approximately $5 billion in derivative-backed financing. The structure, which allows Nigeria to access liquidity while managing foreign exchange exposure, has helped ease pressure on sovereign spreads and pushed Eurobond prices higher across key maturities.
Analysts say the simultaneous decline in both local and external yields points to a broader repricing of Nigerian sovereign risk, after a prolonged period in which investors demanded steep premiums to compensate for inflation, currency volatility, and fiscal uncertainty.
The pattern of demand at this week’s auction, however, underscores a market that remains selective. While the one-year bill dominated subscriptions, mid-tenor demand for the 182-day instrument remained comparatively subdued, suggesting investors are still positioning cautiously across the yield curve.
For policymakers, the easing environment reduces the government’s borrowing costs and signals improving market sentiment, while also requiring careful management to avoid reigniting inflation or weakening the naira. The CBN’s strategy of cutting rates while simultaneously rejecting the bulk of bids reflects an effort to balance liquidity management with controlled market signalling.
